Edgar Filing: PIMCO Income Strategy Fund II

PIMCO Income Strategy Fund II

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY


Investment Company Act File Number:		811-21601

Registrant Name:		PIMCO Income Strategy Fund II

Address of Principal Executive Offices:		1633 Broadway
		New York, NY 10019

Name and Address of Agent for Service:		Trent W. Walker
		650 Newport Center Drive
		Newport Beach, CA 92660

Registrant’s telephone number, including area code:		(844) 337-4626

Date of Fiscal Year End:		July 31

Date of Reporting Period:		October 31, 2017

Item 1. Schedule of Investments

Schedule of Investments

PIMCO Income Strategy Fund II

October 31, 2017 (Unaudited)


	PRINCIPAL AMOUNT (000S)		MARKET VALUE (000S)
INVESTMENTS IN SECURITIES 122.1% ∎
LOAN PARTICIPATIONS AND ASSIGNMENTS 4.0%
Air Medical Group Holdings, Inc.
TBD% due 09/07/2024	$	100	$	100
Altice Financing S.A.
TBD% due 01/05/2026		50		50
Avantor, Inc.
TBD% due 09/07/2024		200		201
Beacon Roofing Supply, Inc.
TBD% due 08/23/2024		40		40
BMC Software Finance, Inc.
5.242% (LIBOR03M + 4.000%) due 09/10/2022 ~		7,014		7,068
Caesars Resort Collection LLC
TBD% due 09/27/2024		400		402
Centene Corp.
TBD% due 09/13/2018		1,400		1,400
CenturyLink, Inc.
2.750% due 01/31/2025		1,000		988
Clover Merger Sub, Inc.
4.833% (LIBOR03M + 3.500%) due 09/26/2024 ~		100		98
Dell, Inc.
TBD% due 09/07/2023		100		100
Forbes Energy Services LLC
5.000% - 7.000% due 04/13/2021 u		273		279
Golden Entertainment, Inc.
4.240% (LIBOR03M + 3.000%) due 08/15/2024 ~		100		100
H.B. Fuller Co.
3.489% (LIBOR03M + 2.250%) due 10/12/2024 ~		100		101
iHeartCommunications, Inc.
8.083% (LIBOR03M + 6.750%) due 01/30/2019 ~		10,700		8,045
Lightstone Generation LLC
5.742% (LIBOR03M + 4.500%) due 01/30/2024 ~		1,977		1,989
McAfee LLC
5.833% (LIBOR03M + 4.500%) due 09/30/2024 ~		100		101
MH Sub LLC
5.070% (LIBOR03M + 3.750%) due 09/13/2024 ~		120		120
Multi Color Corp.
TBD% due 09/20/2024		17		17
Nidda Healthcare Holding AG
TBD% due 09/19/2024	EUR	83		98
3.500% due 08/21/2024		17		20
Numericable Group S.A.
TBD% due 01/31/2026	$	100		100
Ocean Rig UDW, Inc.
8.000% due 09/20/2024		101		103
Olympus Merger Sub, Inc.
5.242% (LIBOR03M + 4.000%) due 10/10/2024 ~		154		154
Parexel International Corp.
TBD% due 09/27/2024		100		101
Petroleo Global Trading
3.597% (LIBOR03M + 2.140%) due 02/19/2020 u~		200		196
Sequa Mezzanine Holdings LLC
6.807% - 6.874% (LIBOR03M + 5.500%) due 11/28/2021 ~		229		232
10.374% (LIBOR03M + 9.000%) due 04/28/2022 ~		90		92
Team Health Holdings, Inc.
3.992% (LIBOR03M + 2.750%) due 02/06/2024 ~		299		296
Traverse Midstream Partners LLC
5.330% (LIBOR03M + 4.000%) due 09/27/2024 ~		91		92
Tronox Blocked Borrower LLC
4.323% (LIBOR03M + 3.000%) due 09/22/2024 ~		23		23
Tronox Finance LLC
4.323% (LIBOR03M + 3.000%) due 09/22/2024 ~		52		53
Unitymedia Finance LLC
TBD% due 10/16/2024		100		100
Unitymedia Hessen GmbH & Co. KG
TBD% due 10/16/2024	EUR	200		234
UPC Financing Partnership
3.732% (LIBOR03M + 2.500%) due 01/15/2026 ~	$	100		100
VICI Properties LLC
TBD% due 10/14/2022		100		100
Vistra Operations Co. LLC
3.987% - 4.084% (LIBOR03M + 2.750%) due 12/14/2023 ~		596		600


Westmoreland Coal Co.		960	607
7.833% (LIBOR03M + 6.500%) due 12/16/2020 ~

Total Loan Participations and Assignments (Cost $26,431)			24,500

CORPORATE BONDS & NOTES 50.5%
BANKING & FINANCE 26.5%
AGFC Capital Trust
3.109% (US0003M + 1.750%) due 01/15/2067 ~		1,800	1,089
Ally Financial, Inc.
8.000% due 11/01/2031		4,610	6,109
Ardonagh Midco PLC
8.375% due 07/15/2023	GBP	700	967
Banco Bilbao Vizcaya Argentaria S.A.
6.750% due 02/18/2020 ¨(i)	EUR	1,600	2,019
Banco do Brasil S.A.
6.250% due 04/15/2024 ¨(i)	$	1,100	1,039
9.000% due 06/18/2024 ¨(i)		2,300	2,530
Banco Espirito Santo S.A.
4.000% due 01/21/2019 ^(e)	EUR	8,100	2,689
4.750% due 01/15/2018 ^(e)		2,300	777
Banco Santander S.A.
6.250% due 09/11/2021 ¨(i)		500	638
Barclays Bank PLC
7.625% due 11/21/2022	$	4,400	5,063
Barclays PLC
6.500% due 09/15/2019 ¨(i)	EUR	3,200	4,017
7.875% due 09/15/2022 ¨(i)	GBP	415	614
8.000% due 12/15/2020 ¨(i)	EUR	4,100	5,546
Blackstone CQP Holdco LP
6.000% due 08/18/2021	$	900	901
6.500% due 03/20/2021		5,000	5,063
BNP Paribas S.A.
7.375% due 08/19/2025 ¨(i)		3,310	3,827
Brighthouse Holdings LLC
6.500% due 07/27/2037 (i)		200	214
Brookfield Finance, Inc.
4.700% due 09/20/2047		124	127
Cantor Fitzgerald LP
6.500% due 06/17/2022 (l)		8,500	9,524
CBL & Associates LP
5.950% due 12/15/2026 (l)		2,300	2,304
Co-operative Group Holdings Ltd.
7.500% due 07/08/2026	GBP	6,150	10,081
Cooperatieve Rabobank UA
6.625% due 06/29/2021 ¨(i)	EUR	1,200	1,627
Credit Agricole S.A.
7.875% due 01/23/2024 ¨(i)	$	700	798
Credit Suisse Group AG
7.500% due 12/11/2023 ¨(i)		7,243	8,437
Emerald Bay S.A.
0.000% due 10/08/2020 ~	EUR	1,873	2,034
Flagstar Bancorp, Inc.
6.125% due 07/15/2021	$	3,500	3,717
Fortress Transportation & Infrastructure Investors LLC
6.750% due 03/15/2022		200	211
GSPA Monetization Trust
6.422% due 10/09/2029		3,682	4,225
Harland Clarke Holdings
8.375% due 08/15/2022		86	90
HSBC Holdings PLC
6.000% due 09/29/2023 ¨(i)	EUR	3,530	4,864
iStar, Inc.
4.625% due 09/15/2020	$	14	14
5.250% due 09/15/2022		49	50
Jefferies Finance LLC
6.875% due 04/15/2022 (l)		6,850	6,953
7.375% due 04/01/2020		2,890	2,995
7.500% due 04/15/2021		347	363
Jefferies LoanCore LLC
6.875% due 06/01/2020		200	207
Lloyds Banking Group PLC
7.625% due 06/27/2023 ¨(i)	GBP	2,300	3,487
7.875% due 06/27/2029 ¨(i)		250	402
MPT Operating Partnership LP
5.250% due 08/01/2026	$	1,292	1,352
Nationwide Building Society
10.250% ~(i)	GBP	13	2,621
Navient Corp.
4.875% due 06/17/2019	$	500	516



5.500% due 01/15/2019		8,300	8,580
5.625% due 08/01/2033		145	126
OneMain Financial Holdings LLC
6.750% due 12/15/2019		1,353	1,405
Oppenheimer Holdings, Inc.
6.750% due 07/01/2022		1,616	1,652
Provident Funding Associates LP
6.375% due 06/15/2025		30	32
Rio Oil Finance Trust
9.250% due 07/06/2024		2,185	2,373
Royal Bank of Scotland Group PLC
7.500% due 08/10/2020 ¨(i)(l)		3,080	3,308
8.000% due 08/10/2025 ¨(i)(l)		5,190	5,946
8.625% due 08/15/2021 ¨(i)		2,700	3,064
Santander UK Group Holdings PLC
6.750% due 06/24/2024 ¨(i)	GBP	2,025	2,956
7.375% due 06/24/2022 ¨(i)		4,100	5,970
Spirit Realty LP
4.450% due 09/15/2026	$	1,500	1,489
Springleaf Finance Corp.
6.125% due 05/15/2022		674	713
8.250% due 10/01/2023		1,300	1,487
Tesco Property Finance PLC
5.411% due 07/13/2044	GBP	4,393	6,752
6.052% due 10/13/2039		2,581	4,143
Vici Properties LLC
4.847% (US0003M + 3.500%) due 10/15/2022 ~	$	549	555
8.000% due 10/15/2023		2,000	2,235
Washington Prime Group LP
5.950% due 08/15/2024		541	556

			163,443

INDUSTRIALS 17.5%
Altice Financing S.A.
7.500% due 05/15/2026 (l)		3,200	3,524
Avantor, Inc.
6.000% due 10/01/2024		130	133
Beacon Escrow Corp.
4.875% due 11/01/2025		30	31
BMC Software Finance, Inc.
8.125% due 07/15/2021		1,800	1,852
Boxer Parent Co., Inc. (9.000% Cash or 9.750% PIK)
9.000% due 10/15/2019 (d)		5,850	5,868
Catalent Pharma Solutions, Inc.
4.875% due 01/15/2026		48	49
Charter Communications Operating LLC
4.200% due 03/15/2028		137	136
5.375% due 05/01/2047		39	40
Cheniere Energy Partners LP
5.250% due 10/01/2025		170	176
Chesapeake Energy Corp.
4.609% (US0003M + 3.250%) due 04/15/2019 ~		134	133
CommScope Technologies LLC
5.000% due 03/15/2027		2	2
Community Health Systems, Inc.
6.250% due 03/31/2023		161	155
CRC Escrow Issuer LLC
5.250% due 10/15/2025		64	65
CSN Resources S.A.
6.500% due 07/21/2020		535	498
DAE Funding LLC
4.000% due 08/01/2020		60	61
4.500% due 08/01/2022		60	61
5.000% due 08/01/2024		160	164
Diamond Resorts International, Inc.
10.750% due 09/01/2024		2,500	2,697
Discovery Communications LLC
3.950% due 03/20/2028		47	47
DriveTime Automotive Group, Inc.
8.000% due 06/01/2021		800	808
Exela Intermediate LLC
10.000% due 07/15/2023		120	115
Ferroglobe PLC
9.375% due 03/01/2022		2,100	2,289
Ford Motor Co.
7.700% due 05/15/2097 (l)		9,770	12,473
Fresh Market, Inc.
9.750% due 05/01/2023		7,590	4,326
goeasy Ltd.
7.875% due 11/01/2022 (c)		46	47
HCA, Inc.
4.500% due 02/15/2027		940	952


5.500% due 06/15/2047		101	103
7.500% due 11/15/2095		1,200	1,234
Hologic, Inc.
4.375% due 10/15/2025		26	26
iHeartCommunications, Inc.
9.000% due 09/15/2022		3,450	2,510
Intelsat Jackson Holdings S.A.
7.250% due 10/15/2020		5,340	5,165
9.750% due 07/15/2025		120	121
Intelsat Luxembourg S.A.
7.750% due 06/01/2021		6,888	4,357
8.125% due 06/01/2023		7,535	4,634
Intrepid Aviation Group Holdings LLC
6.875% due 02/15/2019		9,155	9,086
Kinder Morgan Energy Partners LP
6.375% due 03/01/2041		400	463
Kinder Morgan, Inc.
7.800% due 08/01/2031 (l)		3,500	4,521
Mallinckrodt International Finance S.A.
4.750% due 04/15/2023		252	214
Multi-Color Corp.
4.875% due 11/01/2025		30	30
Netflix, Inc.
4.875% due 04/15/2028		170	169
New Albertson’s, Inc.
6.570% due 02/23/2028		6,800	5,219
Park Aerospace Holdings Ltd.
3.625% due 03/15/2021		82	82
4.500% due 03/15/2023		163	164
5.250% due 08/15/2022		13	14
5.500% due 02/15/2024		36	37
Petroleos Mexicanos
6.500% due 03/13/2027		526	575
6.750% due 09/21/2047		280	289
PetSmart, Inc.
5.875% due 06/01/2025		112	98
Pitney Bowes, Inc.
3.625% due 09/15/2020		30	30
4.700% due 04/01/2023		62	61
Plastipak Holdings, Inc.
6.250% due 10/15/2025		15	15
QVC, Inc.
4.375% due 03/15/2023		420	438
5.950% due 03/15/2043		4,515	4,466
Russian Railways via RZD Capital PLC
7.487% due 03/25/2031	GBP	1,300	2,150
Sabine Pass Liquefaction LLC
5.875% due 06/30/2026 (l)	$	2,500	2,833
Safeway, Inc.
7.250% due 02/01/2031		245	213
Scientific Games International, Inc.
5.000% due 10/15/2025		28	28
10.000% due 12/01/2022		779	864
SFR Group S.A.
7.375% due 05/01/2026 (l)		5,564	6,002
Simmons Foods, Inc.
5.750% due 11/01/2024		42	42
Spirit Issuer PLC
3.034% (BP0003M + 2.700%) due 12/28/2031 ~	GBP	1,000	1,295
6.582% due 12/28/2027		1,000	1,419
Transocean, Inc.
7.500% due 01/15/2026	$	90	93
Unique Pub Finance Co. PLC
5.659% due 06/30/2027	GBP	3,765	5,681
6.542% due 03/30/2021		1,105	1,593
United Group BV
4.375% due 07/01/2022	EUR	100	123
4.875% due 07/01/2024		100	122
UPCB Finance Ltd.
3.625% due 06/15/2029		190	223
Valeant Pharmaceuticals International, Inc.
6.500% due 03/15/2022	$	89	95
7.000% due 03/15/2024		171	186
ViaSat, Inc.
5.625% due 09/15/2025		94	95
Viking Cruises Ltd.
5.875% due 09/15/2027		21	21
Westmoreland Coal Co.
8.750% due 01/01/2022		6,130	3,716
Wind Tre SpA
2.467% due 01/20/2024 ~(c)	EUR	200	234
2.625% due 01/20/2023 (c)		200	234
3.125% due 01/20/2025 (c)		200	234


Wynn Las Vegas LLC
5.250% due 05/15/2027	$	10	10

			108,329

UTILITIES 6.5%
AT&T, Inc.
2.850% due 02/14/2023		200	199
3.400% due 08/14/2024		400	401
3.900% due 08/14/2027		360	359
4.900% due 08/14/2037		366	367
5.150% due 02/14/2050		550	545
5.300% due 08/14/2058		1,364	1,355
DTEK Finance PLC (10.750% Cash or 10.750% PIK)
10.750% due 12/31/2024 (d)		300	312
Gazprom Neft OAO Via GPN Capital S.A.
6.000% due 11/27/2023 (l)		9,600	10,604
Northwestern Bell Telephone
7.750% due 05/01/2030		12,625	14,378
Odebrecht Drilling Norbe Ltd.
6.350% due 06/30/2022 ^(e)		358	216
Odebrecht Offshore Drilling Finance Ltd.
6.625% due 10/01/2023 ^(e)(j)		3,858	1,389
6.750% due 10/01/2023 ^(e)(j)		4,221	1,519
Petrobras Global Finance BV
5.299% due 01/27/2025		160	161
5.999% due 01/27/2028		2,871	2,909
6.125% due 01/17/2022		466	505
6.625% due 01/16/2034	GBP	100	142
6.750% due 01/27/2041	$	2,400	2,424
7.250% due 03/17/2044		251	264
7.375% due 01/17/2027		694	772
Sprint Capital Corp.
6.900% due 05/01/2019		1,100	1,163
Verizon Communications, Inc.
2.875% due 01/15/2038	EUR	100	120
3.375% due 10/27/2036	GBP	100	131

			40,235

Total Corporate Bonds & Notes (Cost $303,417)			312,007

CONVERTIBLE BONDS & NOTES 0.9%
INDUSTRIALS 0.9%
Caesars Entertainment Corp.
5.000% due 10/01/2024 (j)	$	1,066	2,098
DISH Network Corp.
3.375% due 08/15/2026		3,400	3,674

Total Convertible Bonds & Notes (Cost $5,389)			5,772

MUNICIPAL BONDS & NOTES 7.5%
CALIFORNIA 1.2%
Riverside County, California Redevelopment Successor Agency Tax Allocation Bonds, Series 2010
7.500% due 10/01/2030		1,200	1,330
San Francisco, California City & County Redevelopment Agency Tax Allocation Bonds, Series 2009
8.406% due 08/01/2039		1,650	2,239
Stockton Public Financing Authority, California Revenue Bonds, (BABs), Series 2009
7.942% due 10/01/2038		3,500	3,853

			7,422

ILLINOIS 0.2%
Chicago, Illinois General Obligation Bonds, Series 2015
7.375% due 01/01/2033		180	208
7.750% due 01/01/2042		330	361
Illinois State General Obligation Bonds, (BABs), Series 2010
6.725% due 04/01/2035		35	40
7.350% due 07/01/2035		20	23
Illinois State General Obligation Bonds, Series 2003
5.100% due 06/01/2033		280	283

			915

OHIO 3.7%
Ohio State University Revenue Bonds, Series 2011
4.800% due 06/01/2111		21,000	22,989


VIRGINIA 0.1%
Tobacco Settlement Financing Corp., Virginia Revenue Bonds, Series 2007
6.706% due 06/01/2046	835	762

WEST VIRGINIA 2.3%
Tobacco Settlement Finance Authority, West Virginia Revenue Bonds, Series 2007
0.000% due 06/01/2047 (h)	45,700	2,437
7.467% due 06/01/2047	12,305	11,943

		14,380

Total Municipal Bonds & Notes (Cost $38,859)		46,468

U.S. GOVERNMENT AGENCIES 2.4%
Fannie Mae
3.500% due 02/25/2042 (a)	1,079	143
4.500% due 11/25/2042 (a)	2,833	510
5.012% (-1*LIBOR01M + 6.250%) due 01/25/2040 ~(a)	392	61
5.488% (US0001M + 4.250%) due 01/25/2029 ~	400	446
6.088% (US0001M + 4.850%) due 10/25/2029 ~	330	349
Freddie Mac
0.000% due 08/25/2046 (b)(h)	3,050	1,907
0.100% due 08/25/2046 (a)	39,146	164
3.000% due 02/15/2033 (a)	2,327	266
3.500% due 12/15/2032 (a)	3,873	477
4.635% due 11/25/2055 u~	8,723	4,675
8.707% (-2.667*LIBOR01M + 12.000%) due 09/15/2035 ~	776	1,146
8.788% (US0001M + 7.550%) due 12/25/2027 ~	2,895	3,510
11.988% (US0001M + 10.750%) due 03/25/2025 ~	735	1,001
Ginnie Mae
3.500% due 06/20/2042 - 10/20/2042 (a)	842	122
4.000% due 10/16/2042 - 10/20/2042 (a)	515	71

Total U.S. Government Agencies (Cost $14,209)		14,848

NON-AGENCY MORTGAGE-BACKED SECURITIES 21.9%
Banc of America Alternative Loan Trust
6.000% due 01/25/2036 ^	123	116
Banc of America Funding Corp.
6.000% due 01/25/2037	7,117	5,772
Banc of America Funding Trust
3.637% due 01/20/2047 ^~	1,365	1,299
BCAP LLC Trust
3.300% due 07/26/2037 ~	11,230	10,023
3.497% due 08/26/2037 ~	14,014	9,485
3.544% due 08/28/2037 ~	6,956	6,728
3.605% due 05/26/2036 ~	106	2
4.371% due 09/26/2036 ~	5,327	4,685
5.006% due 03/26/2037	987	661
5.750% due 12/26/2035 ~	5,090	4,517
6.250% due 11/26/2036	4,916	4,374
8.542% due 05/26/2037 ~	1,773	772
12.403% due 06/26/2036 ~	475	183
Bear Stearns ALT-A Trust
1.738% (US0001M + 0.500%) due 01/25/2036 ^~	1,537	1,565
3.390% due 09/25/2047 ^~	7,005	5,805
3.469% due 11/25/2035 ~	8,281	7,354
3.477% due 11/25/2036 ^~	524	451
3.758% due 09/25/2035 ^~	664	573
Chase Mortgage Finance Trust
3.287% due 12/25/2035 ^~	11	11
5.500% due 05/25/2036 ^	37	34
Citicorp Mortgage Securities Trust
5.500% due 04/25/2037	119	119
6.000% due 09/25/2037	1,274	1,318
Citigroup/Deutsche Bank Commercial Mortgage Trust
5.688% due 10/15/2048	2,300	1,212
Commercial Mortgage Loan Trust
6.031% due 12/10/2049 ~	2,158	1,358
Countrywide Alternative Loan Resecuritization Trust
6.000% due 05/25/2036 ^	3,035	2,589
6.000% due 08/25/2037 ^~	1,335	1,073
Countrywide Alternative Loan Trust
3.448% due 04/25/2036 ^~	1,409	1,296
5.500% due 03/25/2035	334	260
5.500% due 01/25/2036	795	681
5.500% due 03/25/2036 ^	145	116
5.750% due 01/25/2035	426	427
5.750% due 02/25/2035	468	441
5.750% due 12/25/2036 ^	890	660


6.000% due 02/25/2035		432	448
6.000% due 04/25/2036		653	516
6.000% due 04/25/2037 ^		2,120	1,588
6.250% due 11/25/2036 ^		910	821
6.250% (US0001M + 0.650%) due 12/25/2036 ^~		648	502
6.500% due 08/25/2036 ^		576	396
Countrywide Home Loan Mortgage Pass-Through Trust
1.818% (US0001M + 0.580%) due 03/25/2035 ^~		5,414	4,612
6.000% due 07/25/2037		2,153	1,818
6.250% due 09/25/2036 ^		706	591
Credit Suisse First Boston Mortgage-Backed Pass-through Trust
6.000% due 11/25/2035 ^		510	439
Credit Suisse Mortgage Capital Certificates
4.040% due 10/26/2036 ~		6,845	4,909
Credit Suisse Mortgage Capital Mortgage-Backed Trust
5.750% due 04/25/2036 ^		191	152
Epic Drummond Ltd.
0.137% (EUR003M + 0.190%) due 01/25/2022 ~	EUR	137	158
First Horizon Alternative Mortgage Securities Trust
6.000% due 08/25/2036 ^	$	1,335	1,127
First Horizon Mortgage Pass-Through Trust
3.307% due 05/25/2037 ^~		406	349
3.750% due 11/25/2035 ^~		472	416
GS Mortgage Securities Trust
5.622% due 11/10/2039		1,001	945
IndyMac Mortgage Loan Trust
6.500% due 07/25/2037 ^		3,564	2,364
JPMorgan Alternative Loan Trust
3.098% due 03/25/2037 ^~		1,357	1,264
3.389% due 03/25/2036 ^~		2,370	2,199
3.501% due 05/25/2036 ^~		2,238	1,833
JPMorgan Chase Commercial Mortgage Securities Trust
5.623% due 05/12/2045		1,614	1,463
JPMorgan Mortgage Trust
3.396% due 02/25/2036 ^~		465	420
3.550% due 10/25/2035 ~		334	324
6.500% due 09/25/2035		124	121
LB-UBS Commercial Mortgage Trust
5.407% due 11/15/2038		920	705
5.562% due 02/15/2040 ~		1,371	979
Lehman Mortgage Trust
6.000% due 07/25/2037 ^		1,182	1,123
6.500% due 09/25/2037 ^		2,834	2,135
Lehman XS Trust
1.458% (US0001M + 0.220%) due 06/25/2047 ~		2,579	2,221
MASTR Asset Securitization Trust
6.500% due 11/25/2037 ^		556	403
Merrill Lynch Mortgage Investors Trust
3.210% due 03/25/2036 ^~		2,159	1,672
Morgan Stanley Capital Trust
5.966% due 06/11/2049 ~		1,391	1,395
Nomura Asset Acceptance Corp. Alternative Loan Trust
4.976% due 05/25/2035 ^		14	11
RBSSP Resecuritization Trust
1.397% (US0001M + 0.160%) due 02/26/2047 ~		548	553
Residential Accredit Loans, Inc. Trust
4.335% due 12/26/2034 ^~		1,269	1,037
6.000% due 08/25/2036 ^		410	363
Residential Asset Securitization Trust
5.750% due 02/25/2036 ^		1,225	964
6.000% due 07/25/2037 ^		1,638	1,219
6.250% due 09/25/2037 ^		2,884	2,071
Residential Funding Mortgage Securities, Inc. Trust
4.520% due 09/25/2035 ~		1,012	836
4.592% due 08/25/2036 ^~		1,523	1,362
Structured Adjustable Rate Mortgage Loan Trust
3.277% due 11/25/2036 ^~		2,941	2,729
3.468% due 01/25/2036 ^~		2,614	2,104
3.510% due 07/25/2036 ^~		660	544
Suntrust Adjustable Rate Mortgage Loan Trust
3.569% due 02/25/2037 ^~		343	310
WaMu Mortgage Pass-Through Certificates Trust
3.218% due 02/25/2037 ^~		685	662
3.254% due 05/25/2037 ^~		1,620	1,550
3.261% due 10/25/2036 ^~		965	896
3.338% due 07/25/2037 ^~		1,189	1,114
Wells Fargo Mortgage-Backed Securities Trust
3.191% due 07/25/2036 ^~		340	343
5.750% due 03/25/2037 ^		310	307

Total Non-Agency Mortgage-Backed Securities (Cost $122,901)			135,343

ASSET-BACKED SECURITIES 18.4%


Airspeed Ltd.
1.509% (LIBOR01M + 0.270%) due 06/15/2032 ~		3,092	2,733
Apidos CLO
0.000% due 07/22/2026 ~		1,500	912
Argent Securities Trust
1.428% (US0001M + 0.190%) due 03/25/2036 ~		3,992	2,268
Bear Stearns Asset-Backed Securities Trust
1.378% (US0001M + 0.140%) due 10/25/2036 ^~		5,666	5,703
6.500% due 10/25/2036 ^		370	283
Belle Haven ABS CDO Ltd.
1.593% (LIBOR03M + 0.250%) due 07/05/2046 ~		180,259	2,434
CIFC Funding Ltd.
0.000% due 05/24/2026 (h)		2,400	1,489
0.000% due 07/22/2026 (h)		1,500	991
Citigroup Mortgage Loan Trust
1.388% (US0001M + 0.150%) due 12/25/2036 ~		16,194	8,839
1.398% (US0001M + 0.160%) due 12/25/2036 ~		4,263	2,844
Cork Street CLO Designated Activity Co.
0.000% due 11/27/2028 ~	EUR	2,366	2,497
3.600% due 11/27/2028		1,062	1,239
4.500% due 11/27/2028		929	1,085
6.200% due 11/27/2028		1,150	1,347
Countrywide Asset-Backed Certificates
1.378% (US0001M + 0.140%) due 12/25/2046 ~	$	15,611	11,953
1.378% (US0001M + 0.140%) due 06/25/2047 ^~		1,766	1,419
1.408% (US0001M + 0.170%) due 03/25/2037 ~		2,320	2,220
1.438% (US0001M + 0.200%) due 06/25/2047 ~		11,019	9,461
Countrywide Asset-Backed Certificates Trust
1.988% (US0001M + 0.750%) due 11/25/2035 ~		4,008	4,043
Fremont Home Loan Trust
1.388% (US0001M + 0.150%) due 01/25/2037 ~		15,209	8,867
Grosvenor Place CLO BV
0.000% due 04/30/2029 ~	EUR	500	446
Home Equity Mortgage Loan Asset-Backed Trust
1.398% (US0001M + 0.160%) due 07/25/2037 ~	$	3,328	2,277
HSI Asset Securitization Corp. Trust
0.000% due 10/25/2036 (h)		3,380	1,435
JPMorgan Mortgage Acquisition Corp.
1.528% (US0001M + 0.290%) due 01/25/2036 ~		748	738
Lehman XS Trust
6.290% due 06/24/2046		3,466	3,493
Long Beach Mortgage Loan Trust
1.538% (US0001M + 0.300%) due 01/25/2036 ~		5,000	3,948
Merrill Lynch Mortgage Investors Trust
1.398% (US0001M + 0.160%) due 04/25/2037 ~		585	371
Morgan Stanley Mortgage Loan Trust
6.250% due 07/25/2047 ^~		755	537
SLM Student Loan EDC Repackaging Trust
0.000% due 10/28/2029 u(h)		1	1,448
SLM Student Loan Trust
0.000% due 01/25/2042 u(h)		4	3,360
SoFi Professional Loan Program LLC
0.000% due 05/25/2040 u(h)		4,400	2,323
0.000% due 07/25/2040 u(h)		21	1,207
0.000% due 09/25/2040 u(h)		1,758	1,012
South Coast Funding Ltd.
1.909% (LIBOR03M + 0.600%) due 08/10/2038 ~		12,473	2,557
Taberna Preferred Funding Ltd.
1.672% (LIBOR03M + 0.360%) due 12/05/2036 ~		5,263	4,158
1.692% (US0003M + 0.380%) due 08/05/2036 ~		443	345
1.692% (US0003M + 0.380%) due 08/05/2036 ^~		8,747	6,823
1.813% (LIBOR03M + 0.470%) due 07/05/2035 ~		5,575	4,851

Total Asset-Backed Securities (Cost $110,590)			113,956

SOVEREIGN ISSUES 3.5%
Argentina Bonar Bonds
23.743% (BADLARPP + 2.000%) due 04/03/2022 ~	ARS	60,380	3,613
24.756% (BADLARPP + 3.250%) due 03/01/2020 ~		1,100	68
Argentina Government International Bond
7.820% due 12/31/2033	EUR	7,098	9,516
27.146% (ARPP7DRR) due 06/21/2020 ~	ARS	39,942	2,501
Autonomous Community of Catalonia
4.750% due 06/04/2018	EUR	10	12
4.900% due 09/15/2021		1,500	1,840



Emirate of Abu Dhabi
4.125% due 10/11/2047	$	700	695
Republic of Greece Government International Bond
4.750% due 04/17/2019	EUR	300	358
Saudi Government International Bond
2.875% due 03/04/2023	$	800	798
3.625% due 03/04/2028		800	795
4.625% due 10/04/2047		1,000	1,025
Sri Lanka Government International Bond
6.200% due 05/11/2027		200	213
Venezuela Government International Bond
9.250% due 09/15/2027		315	117

Total Sovereign Issues (Cost $19,592)			21,551


	SHARES
COMMON STOCKS 2.5%
CONSUMER DISCRETIONARY 1.0%
Caesars Entertainment Corp. (f)		486,164	6,296

ENERGY 0.1%
Forbes Energy Services Ltd. (f)(j)		21,825	286
Ocean Rig UDW, Inc. (f)		16,639	445

			731

FINANCIALS 1.4%
TIG FinCo PLC u(j)		2,072,442	2,753
VICI Properties, Inc. (f)(j)		299,145	5,534

			8,287

Total Common Stocks (Cost $14,025)			15,314

WARRANTS 0.0%
INDUSTRIALS 0.0%
Sequa Corp. - Exp. 04/28/2024 u		819,000	281

UTILITIES 0.0%
Dynegy, Inc. - Exp. 02/02/2024		26,843	7

Total Warrants (Cost $71)			288

PREFERRED SECURITIES 4.5%
BANKING & FINANCE 2.2%
Farm Credit Bank of Texas
10.000% due 12/15/2020 (i)		9,150	11,186
VICI Properties, Inc.
0.000% (h)(i)		12,765	1,018
0.000% due 10/02/2035 (j)		16,268	1,297

			13,501

INDUSTRIALS 2.3%
Sequa Corp.
9.000% u		15,193	14,433

Total Preferred Securities (Cost $27,047)			27,934


SHORT-TERM INSTRUMENTS 6.0%
REPURCHASE AGREEMENTS (k) 5.3%				32,457


	PRINCIPAL AMOUNT (000S)
U.S. TREASURY BILLS 0.7%
1.047% due 11/09/2017 - 01/18/2018 (g)(h)(l)(n)(p)		4,102		4,095

Total Short-Term Instruments (Cost $36,552)				36,552

Total Investments in Securities (Cost $719,083)				754,533

Total Investments 122.1% (Cost $719,083)			$	754,533
Financial Derivative Instruments (m)(o) 0.0% (Cost or Premiums, net $(10,200))				219
Preferred Shares (15.0)%				(92,450	)
Other Assets and Liabilities, net (7.1)%				(44,243	)

Net Assets Applicable to Common Shareholders 100.0%			$	618,059

Notes to Schedule of Investments (amounts in thousands*):

*	A zero balance may reflect actual amounts rounding to less than one thousand.

∎	The geographical classification of foreign (non-U.S.) securities in this report are classified by the country of incorporation of a holding. In certain instances, a security’s country of incorporation may be different from its country of economic exposure.

^	Security is in default.

u	Security valued using significant unobservable inputs (Level 3).

Variable or Floating rate security. Rate shown is the rate in effect as of period end. Certain variable rate securities are not based on a published reference rate and spread, rather are determined by the issuer or agent and are based on current market conditions. Reference rate is as of reset date, which may vary by security. These securities may not indicate a reference rate and/or spread in their description.

¨	Rate shown is the rate in effect as of period end. The rate may be based on a fixed rate, a capped rate or a floor rate and may convert to a variable or floating rate in the future. These securities do not indicate a reference rate and spread in their description.

(a)

Interest only security.

(b)

Principal only security.

(c)

When-issued security.

(d)

Payment in-kind security.

(e)

Security is not accruing income as of the date of this report.

(f)

Security did not produce income within the last twelve months.

(g)

Weighted average yield to maturity

(h)

Zero coupon security.

(i)

Perpetual maturity; date shown, if applicable, represents next contractual call date.

(j)

Restricted Securities:


Issuer Description	Acquisition Date		Cost		Market Value		Market Value as Percentage of Net Assets
Caesars Entertainment Corp. 5.000% due 10/01/2024		06/02/2017 - 07/17/2017	$	1,989	$	2,098		0.34	%
Forbes Energy Services Ltd.		10/09/2014 - 12/03/2014		944		286		0.05
Odebrecht Offshore Drilling Finance Ltd. 6.625% due 10/01/2023		04/09/2015 - 07/30/2015		3,061		1,389		0.22
Odebrecht Offshore Drilling Finance Ltd. 6.750% due 10/01/2023		04/09/2015 - 12/17/2015		2,579		1,519		0.25
TIG FinCo PLC		04/02/2015 - 07/20/2017		2,776		2,753		0.45
VICI Properties, Inc.		11/25/2014 - 12/01/2015		4,446		5,534		0.90
VICI Properties, Inc. 0.000% due 10/02/2035		09/27/2017		266		1,297		0.21

			$	16,061	$	14,876		2.42	%

Borrowings and Other Financing Transactions

(k)

Repurchase Agreements:


Counterparty	Lending Rate	Settlement Date		Maturity Date		Principal Amount		Collateralized By	Collateral (Received)			Repurchase Agreements, at Value		Repurchase Agreement Proceeds to be Received⁽¹⁾
BPG	1.200%		10/31/2017		11/01/2017	$	29,400	U.S. Treasury Inflation Protected Securities 0.375% due 07/15/2027	$	(29,992	)	$	29,400	$	29,401
FICC	0.500		10/31/2017		11/01/2017		3,057	Freddie Mac 1.000% due 12/15/2017		(3,121	)		3,057		3,057

Total Repurchase Agreements									$	(33,113	)	$	32,457	$	32,458

Reverse Repurchase Agreements:


Counterparty	Borrowing Rate⁽²⁾			Settlement Date		Maturity Date			Amount Borrowed⁽²⁾			Payable for Reverse Repurchase Agreements
BCY		0.250	%		06/16/2017		TBD	⁽³⁾	$	(1,935	)	$	(1,937	)
BPS		1.820			08/31/2017		12/01/2017			(5,342	)		(5,359	)
CIW		1.540			10/13/2017		11/10/2017			(4,306	)		(4,309	)
JML		1.950			10/13/2017		11/13/2017			(8,611	)		(8,620	)
RBC		2.150			08/07/2017		02/07/2018			(8,477	)		(8,521	)
		2.170			07/10/2017		01/10/2018			(5,502	)		(5,540	)
RDR		1.760			08/02/2017		11/02/2017			(4,248	)		(4,267	)
SOG		1.680			10/30/2017		12/21/2017			(3,905	)		(3,905	)
		1.880			09/07/2017		12/07/2017			(3,161	)		(3,170	)
UBS		1.750			10/10/2017		01/10/2018			(7,748	)		(7,756	)
		1.920			09/14/2017		11/28/2017			(2,615	)		(2,622	)
		1.920			09/14/2017		12/14/2017			(4,661	)		(4,673	)

Total Reverse Repurchase Agreements												$	(60,679	)

(l)

Securities with an aggregate market value of $68,159 have been pledged as collateral under the terms of master agreements as of October 31, 2017.

⁽¹⁾	Includes accrued interest.

⁽²⁾	The average amount of borrowings outstanding during the period ended October 31, 2017 was $(2,041,820) at a weighted average interest rate of 1.763%. Average borrowings may include sale-buyback transactions and reverse repurchase agreements, if held during the period.

⁽³⁾	Open maturity reverse repurchase agreement.

(m)

Financial Derivative Instruments: Exchange-Traded or Centrally Cleared

Swap Agreements:

Credit Default Swaps on Corporate Issues - Sell Protection⁽¹⁾


																						Variation Margin
Reference Entity	Fixed Receive Rate			Payment Frequency		Maturity Date		Implied Credit Spread at October 31, 2017⁽²⁾			Notional Amount⁽³⁾		Premiums Paid/ (Received)			Unrealized Appreciation/ (Depreciation)			Market Value⁽⁴⁾			Asset		Liability
Frontier Communications Corp.		5.000	%		Quarterly		06/20/2020		8.913	%	$	6,500	$	(214	)	$	(313	)	$	(527	)	$	0	$	(4	)

Credit Default Swaps on Credit Indices - Sell Protection⁽¹⁾


																	Variation Margin
Index/Tranches	Fixed Receive Rate			Payment Frequency		Maturity Date		Notional Amount⁽³⁾		Premiums Paid/ (Received)			Unrealized Appreciation/ (Depreciation)		Market Value⁽⁴⁾		Asset		Liability
CDX.HY-24 5-Year Index		5.000	%		Quarterly		06/20/2020	$	8,736	$	674		$	22	$	696	$	3	$	0
CDX.HY-25 5-Year Index		5.000			Quarterly		12/20/2020		7,498		(22	)		625		603		5		0
CDX.HY-29 5-Year Index		5.000			Quarterly		12/20/2022		1,000		83			7		90		1		0

										$	735		$	654	$	1,389	$	9	$	0

Interest Rate Swaps


																				Variation Margin
Pay/Receive Floating Rate	Floating Rate Index	Fixed Rate			Payment Frequency		Maturity Date		Notional Amount		Premiums Paid/ (Received)			Unrealized Appreciation/ (Depreciation)			Market Value			Asset		Liability
Pay	3-Month USD-LIBOR		2.750	%		Semi-Annual		06/17/2025	$	149,020	$	9,092		$	(2,715	)	$	6,377		$	0	$	(65	)
Pay	3-Month USD-LIBOR		2.250			Semi-Annual		06/15/2026		26,800		1,267			(1,228	)		39			0		(8	)
Pay⁽⁵⁾	3-Month USD-LIBOR		2.500			Semi-Annual		12/20/2027		49,000		343			100			443			0		(1	)
Pay	3-Month USD-LIBOR		3.500			Semi-Annual		06/19/2044		201,500		(6,573	)		44,140			37,567			150		0
Receive⁽⁵⁾	3-Month USD-LIBOR		2.750			Semi-Annual		12/20/2047		271,500		(11,619	)		4,995			(6,624	)		0		(247	)
Receive⁽⁵⁾	3-Month USD-LIBOR		2.750			Semi-Annual		01/05/2048		29,500		(1,028	)		323			(705	)		0		(28	)
Pay	6-Month AUD-BBR-BBSW		3.000			Semi-Annual		12/17/2019	AUD	12,900		185			43			228			8		0
Pay	6-Month AUD-BBR-BBSW		3.500			Semi-Annual		06/17/2025		8,100		201			198			399			45		0
Receive⁽⁵⁾	6-Month EUR-EURIBOR		1.000			Annual		03/21/2028	EUR	13,100		(78	)		(35	)		(113	)		0		(43	)
Receive⁽⁵⁾	6-Month GBP-LIBOR		1.500			Semi-Annual		03/21/2028	GBP	24,000		(831	)		613			(218	)		0		(56	)

											$	(9,041	)	$	46,434		$	37,393		$	203	$	(448	)

Total Swap Agreements											$	(8,520	)	$	46,775		$	38,255		$	212	$	(452	)

(n)

Securities with an aggregate market value of $519 and cash of $13,210 have been pledged as collateral for exchange-traded and centrally cleared financial derivative instruments as of October 31, 2017.

⁽¹⁾

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

⁽²⁾

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

⁽³⁾	The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

⁽⁴⁾

The prices and resulting values for credit default swap agreements on credit indices serve as indicators of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced indices’ credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

⁽⁵⁾	This instrument has a forward starting effective date.

(o)

Financial Derivative Instruments: Over the Counter

Forward Foreign Currency Contracts:


							Unrealized Appreciation/(Depreciation)
Counterparty	Settlement Month		Currency to be Delivered		Currency to be Received		Asset		Liability
BOA		11/2017	EUR	37,775	$	44,355	$	354	$	0
BPS		11/2017	$	44,915	EUR	38,604		52		0
		12/2017	EUR	38,604	$	44,991		0		(52	)
CBK		11/2017		260		308		6		0
GLM		11/2017	GBP	394		518		0		(5	)
JPM		11/2017	AUD	740		578		12		0
		11/2017	EUR	569		670		7		0
		11/2017	GBP	40,182		53,855		487		0
UAG		11/2017	$	53,123	GBP	40,576		768		0
		12/2017	GBP	40,576	$	53,169		0		(769	)

Total Forward Foreign Currency Contracts							$	1,686	$	(826	)

Swap Agreements:

Credit Default Swaps on Corporate Issues - Sell Protection⁽¹⁾


																			Swap Agreements, at Value
Counterparty	Reference Entity	Fixed Receive Rate			Payment Frequency		Maturity Date		Implied Credit Spread at October 31, 2017⁽²⁾			Notional Amount⁽³⁾		Premiums Paid/(Received)			Unrealized Appreciation/ (Depreciation)		Asset		Liability
BPS	Petrobras Global Finance BV		1.000	%		Quarterly		12/20/2024		2.729	%	$	1,000	$	(195	)	$	87	$	0	$	(108	)
GST	Petrobras Global Finance BV		1.000			Quarterly		09/20/2020		1.165			10		(1	)		1		0		0
	Petrobras Global Finance BV		1.000			Quarterly		12/20/2021		1.686			100		(16	)		14		0		(2	)
	Petrobras Global Finance BV		1.000			Quarterly		12/20/2024		2.729			1,400		(278	)		127		0		(151	)
HUS	Petrobras Global Finance BV		1.000			Quarterly		12/20/2024		2.729			1,700		(353	)		170		0		(183	)
	Petrobras Global Finance BV		1.000			Quarterly		12/20/2019		0.844			300		(25	)		26		1		0
	Petrobras Global Finance BV		1.000			Quarterly		09/20/2020		1.165			40		(6	)		6		0		0
MYC	Petrobras Global Finance BV		1.000			Quarterly		12/20/2019		0.844			8,700		(805	)		847		42		0

														$	(1,679	)	$	1,278	$	43	$	(444	)

Total Swap Agreements														$	(1,679	)	$	1,278	$	43	$	(444	)

(p)

Securities with an aggregate market value of $919 have been pledged as collateral for financial derivative instruments as governed by International Swaps and Derivatives Association, Inc. master agreements as of October 31, 2017.

⁽¹⁾

⁽²⁾

⁽³⁾	The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

Fair Value Measurements

The following is a summary of the fair valuations according to the inputs used as of October 31, 2017 in valuing the Fund’s assets and liabilities:


Category and Subcategory	Level 1		Level 2			Level 3		Fair Value at 10/31/2017
Investments in Securities, at Value
Loan Participations and Assignments	$	0	$	24,025		$	475	$	24,500
Corporate Bonds & Notes
Banking & Finance		0		163,443			0		163,443
Industrials		0		108,329			0		108,329
Utilities		0		40,235			0		40,235
Convertible Bonds & Notes
Industrials		0		5,772			0		5,772
Municipal Bonds & Notes
California		0		7,422			0		7,422
Illinois		0		915			0		915
Ohio		0		22,989			0		22,989
Virginia		0		762			0		762
West Virginia		0		14,380			0		14,380
U.S. Government Agencies		0		10,173			4,675		14,848
Non-Agency Mortgage-Backed Securities		0		135,343			0		135,343
Asset-Backed Securities		0		104,606			9,350		113,956
Sovereign Issues		0		21,551			0		21,551
Common Stocks
Consumer Discretionary		6,296		0			0		6,296
Energy		731		0			0		731
Financials		5,534		0			2,753		8,287
Warrants
Industrials		0		0			281		281
Utilities		7		0			0		7
Preferred Securities
Banking & Finance		0		13,501			0		13,501
Industrials		0		0			14,433		14,433
Short-Term Instruments
Repurchase Agreements		0		32,457			0		32,457
U.S. Treasury Bills		0		4,095			0		4,095

Total Investments	$	12,568	$	709,998		$	31,967	$	754,533

Financial Derivative Instruments - Assets
Exchange-traded or centrally cleared		0		212			0		212
Over the counter		0		1,729			0		1,729
	$	0	$	1,941		$	0	$	1,941

Financial Derivative Instruments - Liabilities
Exchange-traded or centrally cleared		0		(452	)		0		(452	)
Over the counter		0		(1,270	)		0		(1,270	)

	$	0	$	(1,722	)	$	0	$	(1,722	)

Total Financial Derivative Instruments	$	0	$	219		$	0	$	219

Totals	$	12,568	$	710,217		$	31,967	$	754,752

There were no significant transfers among Levels 1 and 2 during the period ended October 31, 2017.

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund during the period ended October 31, 2017:


Category and Subcategory	Beginning Balance at 07/31/2017		Net Purchases		Net Sales			Accrued Discounts/ (Premiums)		Realized Gain/ (Loss)		Net Change in Unrealized Appreciation/ (Depreciation)⁽¹⁾			Transfers into Level 3		Transfers out of Level 3			Ending Balance at 10/31/2017		Net Change in Unrealized Appreciation/ (Depreciation) on Investments Held at 10/31/2017⁽¹⁾
Investments in Securities, at Value
Loan Participations and Assignments	$	871	$	7	$	(400	)	$	1	$	0	$	(4	)	$	0	$	0		$	475	$	(4	)
Corporate Bonds & Notes
Banking & Finance		4,451		0		(33	)		1		0		20			0		(4,439	)		0		0
Industrials		2,020		0		(2,020	)		0		21		(21	)		0		0			0		0
U.S. Government Agencies		4,994		0		(18	)		38		7		(346	)		0		0			4,675		(347	)
Asset-Backed Securities		9,442		0		0			22		0		(114	)		0		0			9,350		(115	)
Common Stocks
Financials		2,734		0		0			1		0		18			0		0			2,753		18
Warrants
Industrials		384		0		0			0		0		(103	)		0		0			281		(103	)
Preferred Securities
Industrials		14,820		0		0			0		0		(387	)		0		0			14,433		(387	)

Totals	$	39,716	$	7	$	(2,471	)	$	63	$	28	$	(937	)	$	0	$	(4,439	)	$	31,967	$	(938	)

The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy:


Category and Subcategory	Ending Balance at 10/31/2017		Valuation Technique	Unobservable Inputs	Input Value(s) (% Unless Noted Otherwise)
Investments in Securities, at Value
Loan Participations and Assignments	$	279	Other Valuation Techniques⁽²⁾	—		—
		196	Proxy Pricing	Base Price		98.250
U.S. Government Agencies		4,675	Proxy Pricing	Base Price		53.590
Asset-Backed Securities		9,350	Proxy Pricing	Base Price		52.800 - 100,000.000
Common Stocks
Financials		2,753	Other Valuation Techniques⁽²⁾	—		—
Warrants
Industrials		281	Other Valuation Techniques⁽²⁾	—		—
Preferred Securities
Industrials		14,433	Indicative Market Quotation	Broker Quote	$	950.000

Total	$	31,967

⁽²⁾	Any difference between Net Change in Unrealized Appreciation/(Depreciation) and Net Change in Unrealized Appreciation/(Depreciation) on Investments Held at October 31, 2017 may be due to an investment no longer held or categorized as Level 3 at period end.

⁽²⁾	Includes valuation techniques not defined in the Supplementary Notes to Schedule of Investments as securities valued using such techniques are not considered significant to the Fund.

See Accompanying Notes

Notes to Financial Statements

1. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

(a) Investment Valuation Policies The net asset value (“NAV”) of the Fund’s shares is determined by dividing the total value of portfolio investments and other assets attributable to the Fund less any liabilities by the total number of shares outstanding of the Fund.

On each day that the New York Stock Exchange (“NYSE”) is open, Fund shares are ordinarily valued as of the close of regular trading (“NYSE Close”). Information that becomes known to the Fund or its agents after the time as of which NAV has been calculated on a particular day will not generally be used to retroactively adjust the price of a security or the NAV determined earlier that day. The Fund reserves the right to change the time as of which its NAV is calculated if the Fund closes earlier, or as permitted by the U.S. Securities and Exchange Commission (the “SEC”).

For purposes of calculating a NAV, portfolio securities and other assets for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of official closing prices or the last reported sales prices, or if no sales are reported, based on quotes obtained from established market makers or prices (including evaluated prices) supplied by the Fund’s approved pricing services, quotation reporting systems and other third-party sources (together, “Pricing Services”). The Fund will normally use pricing data for domestic equity securities received shortly after the NYSE Close and does not normally take into account trading, clearances or settlements that take place after the NYSE Close. If market value pricing is used, a foreign (non-U.S.) equity security traded on a foreign exchange or on more than one exchange is typically valued using pricing information from the exchange considered by Pacific Investment Management Company LLC (“PIMCO” or the “Manager”) to be the primary exchange. A foreign (non-U.S.) equity security will be valued as of the close of trading on the foreign exchange, or the NYSE Close, if the NYSE Close occurs before the end of trading on the foreign exchange. Domestic and foreign (non-U.S.) fixed income securities, non-exchange traded derivatives, and equity options are normally valued on the basis of quotes obtained from brokers and dealers or Pricing Services using data reflecting the earlier closing of the principal markets for those securities. Prices obtained from Pricing Services may be based on, among other things, information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Certain fixed income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date. Exchange-traded options, except equity options, futures and options on futures are valued at the settlement price determined by the relevant exchange. Swap agreements are valued on the basis of bid quotes obtained from brokers and dealers or market-based prices supplied by Pricing Services. The Fund’s investments in open-end management investment companies, other than exchange-traded funds (“ETFs”), are valued at the NAVs of such investments. Open-end management investment companies may include affiliated funds.

If a foreign (non-U.S.) equity security’s value has materially changed after the close of the security’s primary exchange or principal market but before the NYSE Close, the security may be valued at fair value based on procedures established and approved by the Board of Trustees (the “Board”). Foreign (non-U.S.) equity securities that do not trade when the NYSE is open are also valued at fair value. With respect to foreign (non-U.S.) equity securities, the Fund may determine the fair value of investments based on information provided by Pricing Services and other third-party vendors, which may recommend fair value or adjustments with reference to other securities, indices or assets. In considering whether fair valuation is required and in determining fair values, the Fund may, among other things, consider significant events (which may be considered to include changes in the value of U.S. securities or securities indices) that occur after the close of the relevant market and before the NYSE Close. The Fund may utilize modeling tools provided by third-party vendors to determine fair values of non-U.S. securities. For these purposes, any movement in the applicable reference index or instrument (“zero trigger”) between the earlier close of the applicable foreign market and the NYSE Close may be deemed to be a significant event, prompting the application of the pricing model (effectively resulting in daily fair valuations). Foreign exchanges may permit trading in foreign (non-U.S.) equity securities on days when the Trust is not open for business, which may result in the Fund’s portfolio investments being affected when shareholders are unable to buy or sell shares.

Senior secured floating rate loans for which an active secondary market exists to a reliable degree will be valued at the mean of the last available bid/ask prices in the market for such loans, as provided by a Pricing Service. Senior secured floating rate loans for which an active secondary market does not exist to a reliable degree will be valued at fair value, which is intended to approximate market value. In valuing a senior secured floating rate loan at fair value, the factors considered may include, but are not limited to, the following: (a) the creditworthiness of the borrower and any intermediate participants, (b) the terms of the loan, (c) recent prices in the market for similar loans, if any, and (d) recent prices in the market for instruments of similar quality, rate, period until next interest rate reset and maturity.

Investments valued in currencies other than the U.S. dollar are converted to the U.S. dollar using exchange rates obtained from Pricing Services. As a result, the value of such investments and, in turn, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the Fund is not open for business. As a result, to the extent that the Fund holds foreign (non-U.S.) investments, the value of those investments may change at times when shareholders are unable to buy or sell shares and the value of such investments will be reflected in the Fund’s next calculated NAV.

Investments for which market quotes or market based valuations are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction. The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated to PIMCO the responsibility for applying the fair valuation methods. In the event that market quotes or market based valuations are not readily available, and the security or asset cannot be valued pursuant to a Board approved valuation method, the value of the security or asset will be determined in good faith by the Valuation Oversight Committee of the Board (“Valuation Oversight Committee”), generally based on recommendations provided by the Manager. Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information, bid/ask information, indicative market quotations (“Broker Quotes”), Pricing Services’ prices), including where events occur after the close of the relevant market, but prior to the NYSE Close, that materially affect the values of the Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the values of the Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be reevaluated in light of such significant events.

When the Fund uses fair valuation to determine the value of a portfolio security or other asset for purposes of calculating its NAV, such investments will not be priced on the basis of quotes from the primary market in which they are traded, but rather may be priced by another method that the Board or persons acting at their direction believe reflects fair value. Fair valuation may require subjective determinations about the value of a security. While the Fund’s policy is intended to result in a calculation of the Fund’s NAV that fairly reflects security values as of the time of pricing, the Fund cannot ensure that fair values determined by the Board or persons acting at their direction would accurately reflect the price that the Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by the Fund may differ from the value that would be realized if the securities were sold.

(b) Fair Value Hierarchy U.S. GAAP describes fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. It establishes a fair value hierarchy that prioritizes inputs to valuation methods and requires disclosure of the fair value hierarchy, separately for each major category of assets and liabilities, that segregates fair value measurements into levels (Level 1, 2, or 3). The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Levels 1, 2, and 3 of the fair value hierarchy are defined as follows:

•

Level 1—Quoted prices in active markets or exchanges for identical assets and liabilities.

•

Level 2—Significant other observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs.

•

Level 3—Significant unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available, which may include assumptions made by the Board or persons acting at their direction that are used in determining the fair value of investments.

Assets or liabilities categorized as Level 2 or 3 as of period end have been transferred between Levels 2 and 3 since the prior period due to changes in the method utilized in valuing the investments. Transfers from Level 3 to Level 2 are a result of the availability of current and reliable market-based data provided by Pricing Services or other valuation techniques which utilize significant observable inputs. In accordance with the requirements of U.S. GAAP, the amounts of transfers between Levels 1 and 2 and transfers into and out of Level 3, if material, are disclosed in the Notes to Schedule of Investments for the Fund.

For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to realized gain (loss), unrealized appreciation (depreciation), purchases and sales, accrued discounts (premiums), and transfers into and out of the Level 3 category during the period. The end of period value is used for the transfers between Levels of the Fund’s assets and liabilities. Additionally, U.S. GAAP requires quantitative information regarding the significant unobservable inputs used in the determination of fair value of assets or liabilities categorized as Level 3 in the fair value hierarchy. In accordance with the requirements of U.S. GAAP, a fair value hierarchy, and if material, a Level 3 reconciliation and details of significant unobservable inputs, have been included in the Notes to Schedule of Investments for the Fund.

(c) Valuation Techniques and the Fair Value Hierarchy

Level 1 and Level 2 trading assets and trading liabilities, at fair value The valuation methods (or “techniques”) and significant inputs used in determining the fair values of portfolio securities or other assets and liabilities categorized as Level 1 and Level 2 of the fair value hierarchy are as follows:

Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities and non-U.S. bonds are normally valued on the basis of quotes obtained from brokers and dealers or Pricing Services that use broker-dealer quotations, reported trades or valuation estimates from their internal pricing models. The Pricing Services’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Fixed income securities purchased on a delayed-delivery basis or as a repurchase commitment in a sale-buyback transaction are marked to market daily until settlement at the forward settlement date and are categorized as Level 2 of the fair value hierarchy.

Mortgage-related and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These securities are also normally valued by Pricing Services that use broker-dealer quotations, reported trades or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche-level attributes, current market data, estimated cash flows and market-based yield spreads for each tranche, and incorporate deal collateral performance, as available. Mortgage-related and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Common stocks, ETFs, exchange-traded notes and financial derivative instruments, such as futures contracts, rights and warrants, or options on futures that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy.

Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the NYSE Close. These securities are valued using Pricing Services that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.

Equity exchange-traded options and over the counter financial derivative instruments, such as forward foreign currency contracts and options contracts derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. These contracts are normally valued on the basis of quotes obtained from a quotation reporting system, established market makers or Pricing Services (normally determined as of the NYSE Close). Depending on the product and the terms of the transaction, financial derivative instruments can be valued by Pricing Services using a series of techniques, including simulation pricing models. The pricing models use inputs that are observed from actively quoted markets such as quoted prices, issuer details, indices, bid/ask spreads, interest rates, implied volatilities, yield curves, dividends and exchange rates. Financial derivative instruments that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Centrally cleared swaps and over the counter swaps derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. They are valued using a broker-dealer bid quotation or on market-based prices provided by Pricing Services (normally determined as of the NYSE close). Centrally cleared swaps and over the counter swaps can be valued by Pricing Services using a series of techniques, including simulation pricing models. The pricing models may use inputs that are observed from actively quoted markets such as the overnight index swap rate (“OIS”), London Interbank Offered Rate (“LIBOR”) forward rate, interest rates, yield curves and credit spreads. These securities are categorized as Level 2 of the fair value hierarchy.

Level 3 trading assets and trading liabilities, at fair value When a fair valuation method is applied by PIMCO that uses significant unobservable inputs, investments will be priced by a method that the Board or persons acting at their direction believe reflects fair value and are categorized as Level 3 of the fair value hierarchy. The valuation techniques and significant inputs used in determining the fair values of portfolio assets and liabilities categorized as Level 3 of the fair value hierarchy are as follows:

Proxy pricing procedures set the base price of a fixed income security and subsequently adjust the price proportionally to market value changes of a pre-determined security deemed to be comparable in duration, generally a U.S. Treasury or sovereign note based on country of issuance. The base price may be a broker-dealer quote, transaction price, or an internal value as derived by analysis of market data. The base price of the security may be reset on a periodic basis based on the availability of market data and procedures approved by the Valuation Oversight Committee. Significant changes in the unobservable inputs of the proxy pricing process (the base price) would result in direct and proportional changes in the fair value of the security. These securities are categorized as Level 3 of the fair value hierarchy.

If third-party evaluated vendor pricing is not available or not deemed to be indicative of fair value, the Manager may elect to obtain Broker Quotes directly from the broker-dealer or passed through from a third-party vendor. In the event that fair value is based upon a single sourced Broker Quote, these securities are categorized as Level 3 of the fair value hierarchy. Broker Quotes are typically received from established market participants. Although independently received, the Manager does not have the transparency to view the underlying inputs which support the market quotation. Significant changes in the Broker Quote would have direct and proportional changes in the fair value of the security.

Short-term debt instruments (such as commercial paper) having a remaining maturity of 60 days or less may be valued at amortized cost, so long as the amortized cost value of such short-term debt instruments is approximately the same as the fair value of the instrument as determined without the use of amortized cost valuation. These securities are categorized as Level 2 or Level 3 of the fair value hierarchy depending on the source of the base price.

2. FEDERAL INCOME TAX MATTERS

The Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code (the “Code”) and distribute all of its taxable income and net realized gains, if applicable, to shareholders. Accordingly, no provision for Federal income taxes has been made.

The Fund may be subject to local withholding taxes, including those imposed on realized capital gains. Any applicable foreign capital gains tax is accrued daily based upon net unrealized gains, and may be payable following the sale of any applicable investments.

In accordance with U.S. GAAP, the Manager has reviewed the Fund’s tax positions for all open tax years. As of October 31, 2017, the Fund has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions it has taken or expects to take in future tax returns.

The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return but which can be extended to six years in certain circumstances. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

As of October 31, 2017, the aggregate cost and the net unrealized appreciation (depreciation) of investments for Federal income tax purposes are as follows (amounts in thousands):

Federal

Tax Cost

Aggregate Gross
Unrealized
Appreciation

Aggregate Gross
Unrealized
(Depreciation)

Net Unrealized
Appreciation/
(Depreciation)⁽¹⁾

$ 708,883

116,159

(31,795

)

84,364

⁽¹⁾	Primary differences, if any, between book and tax net unrealized appreciation (depreciation) are attributable to wash sale loss deferrals for Federal income tax purposes.


GLOSSARY: (abbreviations that may be used in the preceding statements)					(Unaudited)

Counterparty Abbreviations:
BCY	Barclays Capital, Inc.	FICC	Fixed Income Clearing Corporation	MYC	Morgan Stanley Capital Services, Inc.
BOA	Bank of America N.A.	GLM	Goldman Sachs Bank USA	RBC	Royal Bank of Canada
BPG	BNP Paribas Securities Corp.	GST	Goldman Sachs International	RDR	RBC Capital Markets
BPS	BNP Paribas S.A.	HUS	HSBC Bank USA N.A.	SOG	Societe Generale
CBK	Citibank N.A.	JML	JP Morgan Securities Plc	UAG	UBS AG Stamford
CIW	CIBC World Markets Corp.	JPM	JPMorgan Chase Bank N.A.	UBS	UBS Securities LLC

Currency Abbreviations:
ARS	Argentine Peso	EUR	Euro	USD (or $)	United States Dollar
AUD	Australian Dollar	GBP	British Pound

Index/Spread Abbreviations:
ARPP7DRR	Argentina Central Bank 7 Day Repo Reference Rate	EUR003M	3 Month EUR Swap Rate	LIBOR03M	3 Month USD-LIBOR
BADLARPP	Argentina Badlar Floating Rate Notes	EURIBOR	Euro Interbank Offered Rate	US0001M	1 Month USD Swap Rate
BP0003M	3 Month GBP-LIBOR	LIBOR01M	1 Month USD-LIBOR	US0003M	3 Month USD Swap Rate
CDX.HY	Credit Derivatives Index - High Yield

Other Abbreviations:
ABS	Asset-Backed Security	BBSW	Bank Bill Swap Reference Rate	PIK	Payment-in-Kind
ALT	Alternate Loan Trust	CDO	Collateralized Debt Obligation	TBA	To-Be-Announced
BABs	Build America Bonds	CLO	Collateralized Loan Obligation	TBD	To-Be-Determined
BBR	Bank Bill Rate	LIBOR	London Interbank Offered Rate	TBD%	Interest rate to be determined when loan settles

Item 2. Controls and Procedures

(a) The principal executive officer and principal financial & accounting officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))), are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits

A separate certification for each principal executive officer and principal financial & accounting officer of the registrant as required by Rule 30a-2 under the 1940 Act is attached as Exhibit 99.CERT.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PIMCO Income Strategy Fund II

By: /s/ Peter G. Strelow

Peter G. Strelow

President (Principal Executive Officer)

Date: December 29, 2017

By: /s/ Trent W. Walker

Trent W. Walker

Treasurer (Principal Financial & Accounting Officer)

Date: December 29, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By: /s/ Peter G. Strelow

Peter G. Strelow

President (Principal Executive Officer)

Date: December 29, 2017

By: /s/ Trent W. Walker

Trent W. Walker

Treasurer (Principal Financial & Accounting Officer)

Date: December 29, 2017